Trading EUR? Follow These Economic Data Releases

Launched in 1999, the euro is a unique currency, given that the EUR is the official currency of 20 member states of the European Union. Managed by the European Central Bank (ECB), it is the second most popular reserve currency for central banks worldwide, with the US dollar being the first. The EUR is also the second most popularly traded currency, beaten once again by the USD. In fact, the EUR/USD comprises the two currencies with the highest liquidity and accounts for a significant portion of the daily average forex trading volumes.

If you too are interested in trading the euro, you should know that economic data releases are considered early indicators of the health of the EU member states, potential monetary policy changes by the ECB, and, therefore, fluctuations in the strength of the EUR. This is why forex traders closely follow economic releases to speculate on uptrends and downtrends in the currency.

Which Economic Releases Should You Follow to Trade the Euro?

Since Germany, France, Spain and Italy account for 75% of the eurozone’s GDP, traders keep a close watch on the most important economic data releases from these countries. Here’s a look at the key economic data releases from the four most influential economies of the eurozone that you should keep an eye on while trading forex pairs that include the euro.

GDP Data

The GDP of the third largest economy of the world, Germany, accounts for 4.29% of the global economy. France, the seventh-largest economy globally, contributes 2.87% of the world’s GDP. Therefore, the economic health of these two nations has a significant impact on the eurozone and its official currency. Italy and Spain contribute 2.17% and 1.53%, respectively, to the global economy.

Now, GDP is an important economic release to follow because it is a key indicator of a country’s, or in this case a region’s, economic health. This is also why GDP data affects market sentiment, with higher-than-expected growth leading to bullish sentiment and lower-than-anticipated growth usually turning the sentiment bearish towards an economy and its currency. So, when GDP growth in the four key nations of the eurozone is high, the EUR tends to strengthen.

Unemployment Rate

Unemployment figures provide insights into the eurozone’s labour market conditions, which can influence economic growth and potentially affect the EUR. Given that Germany and France are the largest economies in the eurozone, they have a considerable impact on the overall unemployment numbers. Historically, Germany’s high employment rate has had a positive impact on the overall eurozone labour market and, therefore, the euro.

On the other hand, France has been reporting high unemployment numbers for some time now. However, the country has a strong industrial base, particularly in sectors like manufacturing, aerospace and luxury goods, and a thriving service sector, both of which have the potential to contribute significantly to employment. Italy and Spain are also major contributors to employment in the eurozone.

Inflation Rate

High inflation tends to lead to the depreciation of the domestic currency and vice versa. The Harmonised Index of Consumer Prices (HICP) is the key indicator of inflation in the EU. The HICP is primarily used to track changes in the prices of goods and services purchased by households, providing a measure of how much it costs to maintain a certain standard of living.  The HICP is typically released by Eurostat, the statistical office of the EU, in the middle of each month.

Specifically, the data is usually released between 15 and 18 days after the end of the reference month. There is also a flash estimate released at the end of each month, which is followed by the full release later in the month.

Now, HICP is calculated for each member state of the European Union. These figures are then used to calculate the Monetary Union Index of Consumer Prices (MUICP), which is the aggregate inflation rate of the eurozone. Needless to say, the inflation of the largest economies of the region will impact the movement of the euro. 

ECB’s Monetary Policy Decisions

While the ECB sets the monetary policy for all member states of the EU, each country also has its own national central bank. The central banks of Germany, France, Spain and Italy are the Deutsche Bundesbank, Banque de France, Banco de España and Bank of Italy. The national central banks are primarily responsible for bank supervision within their respective nations and the implementation of the ECB’s single monetary policy. So, the good news is that EUR traders only need to follow the monetary policy-related announcements of the ECB to make forex trading decisions.

Trade Balance

Did you know that Germany has reported a trade surplus since 1952? Why does this matter in forex trading, especially in the EUR? That’s because trade balance is a key economic indicator that can significantly impact the euro’s value. A trade surplus indicates that more goods and services are exported than imported from the eurozone, increasing demand for the euro. Conversely, a trade deficit suggests the opposite, leading to lower demand for the euro.

The trade balances of Germany, the Netherlands, France, and Italy have the most significant impact on the euro. These four countries account for a large share of the EU’s total exports and imports with non-EU countries. However, Germany and Italy are the only countries with a trade surplus, while the Netherlands has the largest trade deficit in the EU as of 2024.

It is important to note that since forex trading is done with currency pairs, make sure you also follow the important economic data releases of the country to which the other currency belongs. For instance, if you are trading the EUR/USD, you must keep an eye on developments in the eurozone and the United States.

To Sum Up

• The euro is the second most traded currency after the US dollar.
• Economic data releases of nations belonging to the eurozone impact the EUR.
• The health of the region’s largest economies impacts the common currency, such as Germany, France, Spain and Italy.
• The economic data releases to watch while trading the EUR include GDP, unemployment rate, inflation rate, the ECB’s monetary policies and trade balance.
• It is also important to follow the economic data released by the country to which the second currency in the currency pair chosen for forex trading belongs.

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